Gartner Research

Key Principles for Setting an Effective Pricing Strategy

Published: 27 July 2018

ID: G00365884

Analyst(s): Carrie Cowan

Summary

Pricing is an iterative process that requires a customer-first approach and more than just guesswork to get it right. When introducing new products, technology product managers must evaluate the merits of different pricing models to determine their best strategy.

Table Of Contents

Analysis

  • There's No "One Size Fits All" Approach to Pricing
    • Value-Based: Optimizing Pricing Power to Align With Perceived Value
    • Cost-Plus: Fixed Markups Cover Enough Margin to Yield a Return on Costs
    • Price Premium: Higher-Value Product of Service, Anchored by Brand Value and Sentiment
    • Going Rate: Matching the "Floor" or Skimming to Beat the Competition
  • Commit to Knowing the Perceived Value of Your Product Before Pricing It
  • Test Your Model With Prospects Early and Often
  • Turn Pricing Into a Team Sport

Gartner Recommended Reading

©2019 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. and its affiliates. This publication may not be reproduced or distributed in any form without Gartner’s prior written permission. It consists of the opinions of Gartner’s research organization, which should not be construed as statements of fact. While the information contained in this publication has been obtained from sources believed to be reliable, Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner research may address legal and financial issues, Gartner does not provide legal or investment advice and its research should not be construed or used as such. Your access and use of this publication are governed by Gartner’s Usage Policy. Gartner prides itself on its reputation for independence and objectivity. Its research is produced independently by its research organization without input or influence from any third party. For further information, see Guiding Principles on Independence and Objectivity.

Already have a Gartner Account?

Purchase this Document

To purchase this document, you will need to register or sign in above

Become a client